Barr, D. G. and Priestley, R. (2004) 'Expected returns, risk and the integration of international bond markets.', Journal of international money and finance., 23 (1). pp. 71-97.
In this paper we model expected risks and returns on government bonds, allowing for partial integration of national and world bond markets. Using a conditional asset pricing model that permits variation in the price of, and exposure to, risk, we find strong evidence that national markets are only partially integrated into world markets. Around one quarter of total expected excess returns is related to local market risk; the remainder being due to world bond market risk. A range of parameter stability tests rejects the hypothesis of time-variation in the level of integration.
|Keywords:||Partial integration, Expected returns, Conditional asset pricing, Bond markets.|
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|Publisher Web site:||http://dx.doi.org/10.1016/j.jimonfin.2003.10.005|
|Record Created:||29 Mar 2007|
|Last Modified:||13 Apr 2010 14:28|
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